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Income Taxes | 12 Months Ended
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Jun. 30, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES (Loss) income before income taxes consisted of the following for the years ended June 30:
(in thousands) | 2016 |  | 2015 |  | 2014
(Loss) income before income taxes: |  |  |  |  |
United States | $ | (228,667 | ) |  | $ | (323,299 | ) |  | $ | 59,160 |
International | 30,096 |  |  | (64,316 | ) |  | 169,649 |
Total (loss) income before income taxes | $ | (198,571 | ) |  | $ | (387,615 | ) |  | $ | 228,809 |
Current income taxes: |  |  |  |  |
Federal | $ | (15,039 | ) |  | $ | (9,328 | ) |  | $ | 15,108 |
State | 454 |  |  | 816 |  |  | 896 |
International | 31,570 |  |  | 40,433 |  |  | 27,488 |
Total current income taxes | 16,985 |  |  | 31,921 |  |  | 43,492 |
Deferred income taxes: |  |  |  |  |
Federal | $ | 6,786 |  |  | $ | (38,943 | ) |  | $ | 10,157 |
State | 8,407 |  |  | (8,680 | ) |  | (62 | )
International | (6,865 | ) |  | (952 | ) |  | 13,024 |
Total deferred income taxes: | 8,328 |  |  | (48,575 | ) |  | 23,119 |
Provision (benefit) for income taxes | $ | 25,313 |  |  | $ | (16,654 | ) |  | $ | 66,611 |
Effective tax rate | (12.7 | )% |  | 4.3 | % |  | 29.1 | %
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes was as follows for the years ended June 30:
(in thousands) | 2016 |  | 2015 |  | 2014
Income taxes at U.S. statutory rate | $ | (69,500 | ) |  | $ | (135,665 | ) |  | $ | 80,083 |
State income taxes, net of federal tax benefits | 859 |  |  | (1,748 | ) |  | 1,593 |
U.S. income taxes provided on international income | 2,364 |  |  | 3,679 |  |  | 2,423 |
Combined tax effects of international income | (25,469 | ) |  | (21,560 | ) |  | (22,580 | )
Impact of goodwill impairment charges | 6,439 |  |  | 134,657 |  |  | — |
Impact of divestiture | 27,790 |  |  | — |  |  | — |
Change in valuation allowance and other uncertain tax positions | 84,530 |  |  | 1,530 |  |  | (2,603 | )
Impact of domestic production activities deduction | (2,072 | ) |  | — |  |  | (942 | )
Research and development credit | (4,351 | ) |  | (3,087 | ) |  | (1,385 | )
Change in permanent reinvestment assertion | 3,659 |  |  | 2,945 |  |  | 7,170 |
Other | 1,064 |  |  | 2,595 |  |  | 2,852 |
Provision (benefit) for income taxes | $ | 25,313 |  |  | $ | (16,654 | ) |  | $ | 66,611 |
During 2016, we recorded a valuation allowance against our net domestic deferred tax assets of $105.9 million, as discussed below. Of this amount, $81.2 million impacted the effective tax rate and is included in the income tax reconciliation table under the caption "change in valuation allowance and other uncertain tax positions," and $24.7 million was recorded in other comprehensive income. During 2016 and 2015, we recorded goodwill impairment charges related to our Infrastructure segment. There was no tax benefit for a portion of charges in 2016. There was no tax benefit for a majority of charges in 2015. The federal effect of these permanent differences is included in the income tax reconciliation table under the caption "impact of goodwill impairment charges." During 2016, we divested certain non-core businesses as described in Note 4. A portion of the loss from this divestiture was not deductible for tax purposed. The Federal effect of this permanent difference is included in the income tax reconciliation table under the caption "impact of divestiture." During 2016 we recorded on adjustment of $3.7 million related to a change in assertion of certain foreign subsidiaries' undistributed earnings primarily related to the transaction described in Note 4, which are no longer considered permanently reinvested. The effect of this charge is included in the income tax reconciliation table under the caption "change in permanent reinvestment assertion." During 2015, we recorded an adjustment of $2.9 million related to a change in assertion of certain foreign subsidiaries' undistributed earnings, which are no longer considered permanently reinvested. The effect of this charge is included in the income tax reconciliation table under the caption "change in permanent reinvestment assertion." During 2014, we recorded an adjustment of $2.2 million related to the effective settlement of uncertain tax positions in Europe, which reduced income tax expense. The effects of these tax benefits are included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.” During 2014, we recorded a valuation allowance adjustment of $1.2 million, which reduced income tax expense. The valuation allowance adjustment is related to a state tax law change. The effect of this tax benefit is included in the income tax reconciliation table under the caption “change in valuation allowance and other uncertain tax positions.” During 2014, we recorded an adjustment of $7.2 million related to a change in assertion of a foreign subsidiary’s certain undistributed earnings, which are no longer considered permanently reinvested. The effect of this charge is included in the income tax reconciliation table under the caption “change in permanent reinvestment assertion.” The components of net deferred tax assets and (liabilities) were as follows at June 30:
(in thousands) | 2016 |  | 2015
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 77,198 |  |  | $ | 47,289 |
Inventory valuation and reserves | 18,865 |  |  | 18,023 |
Pension benefits | 42,432 |  |  | 23,559 |
Other postretirement benefits | 7,111 |  |  | 7,359 |
Accrued employee benefits | 17,069 |  |  | 23,674 |
Other accrued liabilities | 9,229 |  |  | 18,210 |
Hedging activities | 5,507 |  |  | 4,354 |
Tax credits and other carryforwards | 30,733 |  |  | 13,815 |
Intangible assets | 21,575 |  |  | — |
Other | — |  |  | 12,028 |
Total | 229,719 |  |  | 168,311 |
Valuation allowance | (122,699 | ) |  | (16,771 | )
Total deferred tax assets | $ | 107,020 |  |  | $ | 151,540 |
Deferred tax liabilities: |  |  |
Tax depreciation in excess of book | $ | 83,412 |  |  | $ | 102,480 |
Intangible assets | — |  |  | 18,688 |
Other | 149 |  |  | — |
Total deferred tax liabilities | $ | 83,561 |  |  | $ | 121,168 |
Total net deferred tax assets (liabilities) | $ | 23,459 |  |  | $ | 30,372 |
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized. In evaluating the need for a valuation allowance, we consider all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations, and projections of future profitability within the carry forward period, including taxable income from tax planning strategies. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of the deferred tax asset based on existing projections of income. Upon changes in facts and circumstances, we may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a future charge to establish a valuation allowance. Existing valuation allowances are re-examined under the same standards of positive and negative evidence. If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. In 2016, we recorded a valuation allowance of $105.9 million against our net deferred tax assets in the U.S. Of this amount, $81.2 million was recorded in the provision for income taxes and $24.7 million was recorded in other comprehensive income. After weighing all available positive and negative evidence, as previously described, we determined that it was no longer more likely than not that we will realize the tax benefit of these deferred tax assets. This was driven by cumulative pre-tax domestic losses from charges related to asset impairment, restructuring and loss on divestiture, as well as an overall decrease in demand in U.S. operations. The need for this valuation allowance will be assessed on a continuous basis in future periods and, as a result, a portion or all of the valuation allowance may be reversed based on changes in facts and circumstances. Included in deferred tax assets at June 30, 2016 is $30.7 million associated with tax credits and other carryforward items primarily in federal and state jurisdictions. Of that amount, $1.1 million expires through 2021, $22.9 million expires through 2026, $0.6 million expires through 2031, $5.9 million expires through 2036 and the remaining $0.2 million does not expire. Included in deferred tax assets at June 30, 2016 is $77.2 million associated with net operating loss carryforwards in state and foreign jurisdictions. Of that amount, $7.2 million expires through 2021, $3.6 million expires through 2026, $2.1 million expires through 2031, $39.7 million expires through 2036, and the remaining $24.6 million does not expire. The realization of these tax benefits is primarily dependent on future taxable income in these jurisdictions. A valuation allowance of $122.7 million has been placed against deferred tax assets in the U.S., Europe, China, Hong Kong and Brazil, all of which would be allocated to income tax expense upon realization of the deferred tax assets. In 2016, the valuation allowance related to these deferred tax assets increased by $105.9 million. As the respective operations generate sufficient income, the valuation allowances will be partially or fully reversed at such time we believe it will be more likely than not that the deferred tax assets will be realized. As of June 30, 2016, unremitted earnings of our non-U.S. subsidiaries and affiliates of $2,019.4 million, the majority of which have not been previously taxed in the U.S., are considered permanently reinvested, and accordingly, no deferred tax liability has been recorded in connection therewith. It is not practical to estimate the income tax effect that might be incurred if cumulative prior year earnings not previously taxed in the U.S. were remitted to the U.S. A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest) is as follows as of June 30:
(in thousands) |  | 2016 |  | 2015 |  | 2014
Balance at beginning of year |  | $ | 14,619 |  |  | $ | 20,366 |  |  | $ | 26,798 |
Increases for tax positions of prior years |  | 1,197 |  |  | — |  |  | 1,461 |
Decreases for tax positions of prior years |  | — |  |  | (3,188 | ) |  | (6,982 | )
Increases for tax positions related to the current year |  | — |  |  | — |  |  | 116 |
Decreases related to settlement with taxing authority |  | (11,942 | ) |  | (348 | ) |  | (2,161 | )
Decreases related to lapse of statute of limitations |  | (667 | ) |  | (398 | ) |  | — |
Foreign currency translation |  | (101 | ) |  | (1,813 | ) |  | 1,134 |
Balance at end of year |  | $ | 3,106 |  |  | $ | 14,619 |  |  | $ | 20,366 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in 2016, 2015 and 2014 is $3.1 million, $2.7 million and $2.4 million, respectively. Our policy is to recognize interest and penalties related to income taxes as a component of the provision for income taxes in the consolidated statement of income. We recognized a reduction in interest of $0.2 million and $0.7 million in 2016 and 2015, respectively. We recognized interest expense of $0.8 million in 2014. As of June 30, 2016 and 2015 the amount of interest accrued was $0.3 million and $0.5 million, respectively. As of June 30, 2016 and 2015, the amount of penalty accrued was $0.3 million and $0.2 million, respectively. In 2016, decreases for tax positions related to the current year primarily relate to one foreign tax position. We settled this position with the foreign authority. A corresponding deferred tax asset in the amount of $11.9 million was released for the position in the U.S. and in the prior year this amount was included in the components of net deferred tax liabilities and assets table under the caption "other." With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2010. The Internal Revenue Service has audited all U.S. tax years prior to 2013 and is currently examining 2014. Various state and foreign jurisdiction tax authorities are in the process of examining our income tax returns for various tax years ranging from 2010 to 2014. We continue to execute our pan-European business model. As a result of this and other matters, we continuously review our uncertain tax positions and evaluate any potential issues that may lead to an increase or decrease in the total amount of unrecognized tax benefits recorded. We believe that it is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $0.6 million within the next twelve months.

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